LASTING power of attorney (LPA), financial advisers unanimously agree, is as important as having a will, but they say LPAs are “massively underused” and warn that “the consequences of not having one can be severe”.
They add that, much like wills, people typically associate LPAs with old age and prefer not to deal with them, but they stress that “loss of capacity can happen at any stage of life through illness or accident”.
A lasting power of attorney is a legal document that lets someone (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help them make decisions or to make decisions on their behalf.
LPAs essentially ensure people have more control over what happens to them if they have an accident or an illness and cannot make their own decisions because they ‘lack mental capacity’.
There are 2 types of LPA. One relates to health and welfare and the other to property and financial affairs. People can choose to make one type or both.
People must be 18 or over and have mental capacity (the ability to make their own decisions) when they make their LPA, and applying to register an LPA costs £92, although some can get a reduction or exemption.
If an LPA is not in place, next of kin will have to go through the Court of Protection if a loved one loses capacity, which can be time-consuming and emotionally draining.
Next of kin
Joe Farmer, Co-Founder at The Retirement Studio, said: “In my opinion, LPAs should be viewed as just as important as writing a will but a huge percentage of families only realise how important they are when it’s already too late.
“Most people assume their spouse or next of kin can automatically step in and manage their finances if they lose mental capacity, but that simply isn’t the case.
“Without Lasting Power of Attorney, families can quickly find themselves unable to access bank accounts, manage bills or deal with mortgages.
“I’ve seen situations where direct debits for important household expenses have been cancelled while non-essential payments continued, causing unnecessary stress at an already difficult time.
“A lot of people bury their heads in the sand because they associate LPAs with old age, but loss of capacity can happen at any stage of life through illness or accident.
“Others simply aren’t aware of what an LPA actually does until they are faced with the reality of trying to help a loved one without one in place.
“The process to apply through the Court of Protection after capacity is lost can be lengthy, expensive and emotionally draining compared to putting an LPA in place early.”
Legal authority
Graham Nicoll, Financial Planner at NCL Wealth Partners, said he sees LPA pain points regularly.
He added: “I was with a friend on Friday whose mum was not able to access accounts in her husband’s name or liaise with a utility provider, which was causing major financial concerns and emotional stress.
“Another client had an issue where healthcare professionals were making decisions about their partner’s care that were different from theirs and that of their partner, before they lost mental capacity, as they did not have an LPA in place and therefore lacked the legal authority.”
Steven Greenall, Director at Greenall Estate Planning, agreed that LPAs are dangerously under-utilised.
He said: “Everyone knows they need Lasting Powers of Attorney, but nowhere near enough people have them in place. They are not just for the elderly, as accidents and illness can occur at any age and leave you without capacity to act for yourself.
“Applying to the Court of Protection can be slow and expensive, leaving rent, mortgages and bills unpaid. Being someone’s next of kin does not grant rights to make decisions or act on your behalf.
“LPAs can be done yourself, but it’s best to seek advice to ensure your attorneys are assigned correctly, that you consider reserve attorneys and, on top of that, are clear as to how you want the attorneys to act.
“Ensuring the donor and attorneys’ signatures are witnessed and dated in the correct order is onerous and with registration fees at £92 now, let a professional take the risk. Ensure you shop around for clear and transparent pricing as the cost for preparing LPAs varies widely.”
Legal advice
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said that many people “genuinely do not understand what an LPA does”.
She continued: “They assume being married, being a child, or being next of kin automatically gives legal authority. Sadly it does not. The current registration fee is £92 per LPA in England and Wales, so £184 if someone registers both property and financial affairs, and health and welfare.
“People can do it themselves, but mistakes can cause delays or rejection, so legal advice is sensible where there are family tensions, business assets, property, vulnerability or complexity.”
Paul Denley, CEO at London-based Oakham Wealth Management, said LPAs succumb to the same forces as wills, namely that people would rather not think about them.
He said: “LPAs remain one of the most under-appreciated aspects of family wealth protection. Most organised families either delay them or never act at all – rarely because of complexity, but because of human nature.
“People associate LPAs with ageing or incapacity, so the conversation is postponed until crisis forces it. What makes this so frustrating is that LPAs matter most precisely when life takes an unexpected turn: a stroke, accident or dementia diagnosis.
“Without one, bank accounts can freeze, investments become inaccessible and decisions stall while families navigate the Court of Protection.
“But having an LPA is only half the issue. Who you appoint matters enormously. I have seen a well meaning family member suddenly take control of an investment portfolio with little understanding of markets or risk, creating tension and unrealistic expectations.
“The cost is modest relative to the protection involved. The real risk is not putting one in place before it is needed.”
Walk lighter
Jess Best, Independent Financial Planner at McLaren Capital, agreed that people prefer to avoid LPAs but emphasised that, once they’re done, they can get on with their life knowing that an important box has been ticked.
She said: “Implementing an LPA can make you walk lighter because then you don’t have to worry about the ‘what if’. You have the peace of mind that people you trust will look after you and your affairs.
“With an evolving inheritance tax landscape, too, it is also important to consider whether trust powers need to be included within the LPA.
“I recently helped a client who was an attorney for her mother whom unfortunately did not have trust powers over her investment and there was nothing we could do until death.”
Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning, added: “LPAs are still hugely underused, and in my experience a significant number of families run into problems because they don’t have one in place.
“It’s one of the simplest but most overlooked parts of financial planning — and the consequences of not having one can be severe.”
